Rowley Law

Work with an Attorney to Keep your Power of Attorney Powerful

“While you may already have POAs in place, several legislative changes over the years have given financial institutions and healthcare providers reasons to reject them.”

One key component of a solid financial plan is properly configured estate planning documentation—especially medical and financial powers of attorney (POA). These documents give you the ability to legally authorize an individual to handle your affairs and make healthcare decisions, in the event that you become incapacitated and are unable to make them on your own.

Forbes’s recent article, “Don't Let Your Power Of Attorney Become Powerless,” lists some actions to ensure that your documents are effective.

1. Hire a qualified estate planning attorney. This will mean less expense and headaches for you in the future. Your attorney will be sure that any necessary legislative changes are incorporated into your POAs correctly.
2. Ask your attorney about changes in the law. New laws mean necessary provisions must be incorporated in your POAs to keep them current. Without them, your documents won’t be accepted. For example, your financial POA must disclose certain provisions adopted by the Uniform Power of Attorney Act (UPOAA). The UPOAA was enacted in 2006 to help enforce the acceptance of POAs and to standardize provisions across the country. This because banks will frequently reject POAs, if they think that in good faith, it may no longer be a valid document. Some authorities (called “hot powers”) will now only be accepted if they are clearly contained into your POA, such as the ability for your POA to amend trust documents, make gifts on your behalf and designate or change beneficiaries.
3. Review your estate planning documents regularly. Once in place, keep your POA current. If they’re out-of-date, they might be rejected when you need them. Review your document when you have a major life event or a change in your situation. Be certain that the people you designate to act on your behalf continue to be in line with your wishes.

Refrain from naming multiple people to act jointly. This requires individuals to coordinate and agree when acting on your behalf.  It may result in unnecessary difficulties and delays in decision-making.  However, name a backup in case your currently named POA is unable or unwilling to serve.

Review your POAs every few years to be sure they are compliant with current legislation and also consistent with your wishes. In that way, your POAs won’t become powerless. Work with a qualified estate planning attorney and get it right.

Reference: Forbes (June 13, 2017) “Don't Let Your Power Of Attorney Become Powerless”

Estate Planning Reminders for Same-Sex Couples

“Most couples can benefit from estate planning to ensure their assets land in the right hands after they die and their health care wishes are followed. But same-sex couples often have special situations that require extra planning.”

The Palm Beach Post’s recent article, “Estate Planning 101 for Same-Sex Couples,” lays out some steps that same-sex couples can take to get moving with their estate planning.

What’s your marital status? The U.S. Supreme Court’s 2015 decision in Obergefell v. Hodges legalized same-sex marriage throughout the nation. However, the mishmash of prior state laws has had some unintended consequences in estate planning. Assets typically pass to a spouse upon death, so it’s critical to know that past relationships have been dissolved. Prior to 2015, some same-sex couples were married in states that recognized their marriages, then moved to states that didn’t recognize those marriages and then subsequently ended their relationships. Believing that their nuptials “didn’t count” in the non-legal states, some couples split up but didn’t legally dissolve their marriages. Some states have automatically converted registered domestic partnerships or civil unions into legal marriages. Therefore, there are people who are married and don’t know it.

What you need besides a will. A will is critical for couples with children from previous relationships or those who had children before legally marrying. If you don’t have a will, it can be unclear where assets should go when the last partner dies. In addition, same-sex couples should sign a power of attorney to give a spouse or someone else the power to act on your behalf in certain situations. Creating a trust can also be an excellent idea, especially if there are concerns about fighting over your assets when you die. A trust is established during your lifetime. Couples can place assets into the trust—when one dies, there’s less of an opportunity to contest it, because trusts don’t go through probate.

Consider your medical needs. Same-sex couples need to document their wishes, and there are several options. Two of the most popular are a health care proxy or a power of attorney for medical treatment. This lets a person of your choosing, make medical decisions for you, if you’re incapacitated and can allow physicians to share your medical information with those you name in the document. A living will—or a do-not-resuscitate (DNR) or other kind of health directive—also states your preferences for medical treatment when you can’t communicate.

What about your kids? When parents die, their assets typically pass to their children. However, to be certain that your property goes to your kids, same-sex parents may want to make adoption part of their estate planning. Frequently, just one parent is biologically related to the child. Some states have second-parent adoption, otherwise known as a step-parent adoption or a confirmation adoption. This process confirms that the children are related to everybody.

Not the time to freelance! Same-sex couples should avoid do-it-yourself estate planning services online, because these typically don’t account for the needs of same-sex couples. LGBT couples need to remember that their situation is a little bit different. They need to talk to a lawyer who understands what those potential issues are. Call Rowley Law at 847-490-5330, to schedule your appointment today. 

Reference: Palm Beach Post (June 7, 2017) “Estate Planning 101 for Same-Sex Couples”

Estate Planning Issues for Marriage #2

“Getting married for a second time is fairly common. But the financial and estate planning issues that result from remarriage can be anything but.”

When you are married a second time, the complications and challenges of blended families can really grow, says Forbes’ recent article, “Second Marriage and Estate Planning: 5 Things You May Not Have Considered.” That story provides some financial, legal, and estate planning issues to consider, including:

Expenses and ownership. Commingled income and assets may be at risk,  since many remarried couples set up joint accounts to pay for living expenses. Keeping money separate may be crucial, if you’re still financially entangled with your ex. Remember that divorce decrees do not necessarily bind creditors. As a result, an ex’s default could leave you responsible for an old debt.

Community Property and Common Law. Make sure that you understand the implications if you reside in a community property state. In those jurisdictions, the assets you bring to the marriage or receive individually will stay yours. However, what you earn or acquire during the marriage is owned equally by both spouses. This can be compared with a common law state. In those states, titles, registrations, or ownership documents control ownership. If you have property in another state, you may need to consider both scenarios. These differences in state property laws show how important it is to work with an experienced estate planning attorney.

Remarriage. If your spouse gets remarried after you pass away, the assets can become commingled. A good option in this situation is a trust to protect assets for each spouse's children, if that is your wish.

Inheritance. Consider what would happen to inheritances for the children of the first spouse to die. Would they be required to wait for the second spouse to die? The best answer is a trust that can give specific instructions in that scenario. If you die before your new spouse, and you own assets jointly, it may effectively disinherit your children from a prior marriage. It may not be your intent, but your new spouse will have the authority to decide who inherits any jointly-owned assets.

Use of the home. When you are in a blended family, you must determine whether the surviving spouse will be allowed to live in the home and for how long. One option is to place the home in a trust for the benefit of the surviving spouse.

Finally, if you created your estate plan before your second marriage, be sure to modify that plan to account for your new family. An estate planning attorney will be able to help you determine the best way to protect your new spouse and your children from any prior marriages. Call Rowley Law today to schedule and appointment, 847-490-5330.

Reference: Forbes (June 2, 2017) “Second Marriage and Estate Planning: 5 Things You May Not Have Considered”

Estate Planning 101: The Basics

“Estate planning is an essential part of an individual’s personal finances. This is true no matter how wealthy a person is.”

Estate planning is a process in which a person details how their money and other assets should be managed during life and after their death.

WMUR’s recent article, “Money Matters: Importance of estate planning,” starts with some basics. An estate includes all of the property that you own.  It is the outright ownership or ownership you share with someone else, like your home, bank accounts, investments and heirlooms. Managing these assets through all of your life events is the objective. Even if you’re incapacitated, you have a plan in place so your finances are supervised. Along those lines, is determining the type of medical care you want to receive, if you can’t communicate those wishes. This is done with a healthcare directive.

Here are a few other items that you need to consider with the help of a qualified estate planning attorney:

Financial plan. You should have a firm grasp of your finances and your family situation.

Will. The key document that all plans should contain. A will spells out the property you wish to leave to family, friends, and organizations. You should also name a personal representative to manage the probate process.

Guardianship. Your will should also designate guardians for your minor children, so you can say who will rear your children, if you and your spouse both die.

Directives. This includes durable powers of attorney for finances and health care. You can name individuals who you trust to take handle your finances and make health care decisions, if you’re unable to do so. Without these documents in place, the court will appoint someone to manage your finances. This could be someone who is unfamiliar with you and your situation.

Trusts. A trust lets funds be managed by a person or group for the benefit of others, pursuant to the instructions in the trust document. Blended families, families that include children with special needs, and situations where control over the funds for an extended period is needed, are all potential scenarios for a trust.

Beneficiary Designations. Life insurance proceeds and retirement accounts will pass via beneficiary designations, so these should be current and aligned with your estate plan.

Funeral plans. You can leave specific instructions about your final arrangements, such as being buried or cremated, as well as electing to donate your organs.

Creating an estate plan can give you peace of mind. Your family will also be relieved of the stress that comes with making choices when they don’t know your wishes. If you fail to create an estate plan and have no documents, the state will provide a plan for you.  However, it might something you would not like.

Review your plans periodically and work with a qualified estate planning attorney. Call Rowley Law today to schedule your appointment, 847-490-5330.

Reference: WMUR (June 1, 2017 “Money Matters: Importance of estate planning”

Life Estate May be the Solution to Your Estate Planning Issues

“A life estate can solve some possibly lengthy and costly problems for your heirs.”

Kiplinger’s recent article, “An Overlooked Way to Pass Down Your Home Without Probate: The Life Estate,” explains that simply designating a beneficiary in your will or assuming your home will pass to your children might mean issues for your heirs. If you don’t want to create a trust, you may want to consider a life estate.

With this strategy, you (as the “life tenant”) retain the right to live in your home until your death.  The property is then automatically transferred to the “remaindermen,” or your designated heirs. This can be advantageous for individuals or for couples who want to be sure that both parties can remain in the home for their lifetimes.

You’ll need to execute and file a deed to the property that records your status as the “grantor,” your remaindermen’s status as “grantees” and a clause on the deed that stipulates that you retain a life estate in the home. You should then update your property insurance policy to reflect the addition of new owners. As the life tenant, you’re still responsible for paying the mortgage, taxes, insurance premiums and maintaining the property. But even though you’ll have all the responsibilities of a full owner, your control over your home is complete. Once you add remaindermen to your property’s deed, you cannot just remove them without their consent. You also can’t sell or mortgage your home without the agreement of the remaindermen.

One potential drawback to a life estate is that a life estate ties up your financial interests with that of your heirs. For example, their divorce or bankruptcy could impact the property with a lien. It is also important to note that giving away assets through a life estate, may impact the timing of Medicaid eligibility and result in gift taxes for your heirs.

In addition to ensuring that you’ll remain in your home, it can make it simpler for your heirs to manage the logistics of your property after you pass away. For instance, you can use a life estate to make sure that your home goes to your children from a previous marriage while also guaranteeing that your spouse can stay for his or her lifetime, if you die first.

When making these types of plans, talk to an experienced estate planning attorney to help find the options that are best for your family. Call Rowley Law today at 847-490-5330 to schedule an appointment. 

Reference: Kiplinger (May 2017) “An Overlooked Way to Pass Down Your Home Without Probate: The Life Estate”

Don’t Delay Your Estate Planning

“If you’ve been putting it off because it's sad or uncomfortable, don't. Estate planning can be a loving tribute and source of comfort. Here’s what to consider.”

No one likes death or thinking about their own mortality. OK, maybe the undertaker, but for the rest of us, it’s creepy. Estate planning can make people uneasy because it deals with death. But it can give loved ones peace of mind.

Some of the elements of final planning are described below.

In the article, “A Will Can Be a Beautiful Thing,” Kiplinger’s advises that the initial step in estate planning is creating a will. A recent survey found that 64% percent of American adults don't have a will. They either decided they didn't need one or they have just kept putting it off. A will instructs who you want to inherit your assets. It’s also used to let parents name a guardian to care for their minor children. Without a will, all of your estate may wind up in probate court. One option of an estate plan is a living trust. A trust transfers assets from the trust to beneficiaries without having to go through the probate process.

Here are a few other reminders about estate plans:

Spell Out Your Decisions on End-of-Life Care. Tell loved ones your wishes in the event that you are unable to make medical decisions for yourself. This includes life support, sustenance and pain treatment,  as well as organ donation. A living will also contains a health care declaration with a power of attorney designating the agent you name to ensure that your medical instructions are executed.

Check Your Beneficiaries. Fill out each of the beneficiary designations for your bank accounts, brokerage accounts and life insurance policies. You should specify both your primary and contingent beneficiaries.

Document Your Funeral Wishes.  Specify whether you want to be buried or cremated. You can also list favorite music or scriptures for your end-of-life celebration or funeral. You should also note if you’re a veteran and whether you have funds put aside for funeral expenses.

Other Thoughts. Keep real estate and car deeds, wills, trusts, insurance policies, retirement benefits, 401(k), and IRA documents in a safe location. But make sure to tell the executor of your estate where these items are kept.

If you are married, don’t draft a joint will. This is because it is unlikely that you’ll pass away at the same time. Separate wills for each spouse can address other personal circumstances, like previous marriages, other children and charitable causes.

Don’t think of estate planning as creepy. Think of how it protects your family.

Reference: Kiplinger’s (April 2017) “A Will Can Be a Beautiful Thing”

Answers to Everybody’s Estate Planning Questions

“How do I keep my heirs from having to go through probate?”

There are some estate planning questions that many of us would like answered. These include how to keep heirs from going through probate, whether you need an estate planning attorney or can you just use an online form and how to select an executor.

Next Avenue’s recent article, “Probate, Wills, Executors: Your Estate Planning Questions Answered,” addresses each of these questions.

Probate. Probate is the legal process for transferring your assets to your heirs. It’s governed by the law in the state where you were a resident at the time of death. Each state has its own cutoffs for the size of an estate that can be transferred without going through probate. In some states, the limit is a few thousand dollars, but in some it’s $200,000. In addition, probate is a public notice of death. This allows creditors to file claims against an estate. After they are paid, the rest of the estate goes to the beneficiaries. You may want to avoid the lengthy process, the expenses and fees and perhaps even the publicity. It is important to remember that probate proceedings are open to the public.

The need for an attorney. You should hire an experienced estate planning attorney to draft your will. Many Americans in their 50s and 60s don’t have one and it becomes a real problem for their heirs! A recent Caring.com survey found that 40% of boomers don’t have a will. The more complicated your instructions for passing your assets, the more important it is to use a lawyer. Complexities, nuances, and intricate state probate and tax laws, often result in expensive errors in self-drafted documents. Your tax software may have guaranteed the results, but your heirs will be on their own if your do-it-yourself will is flawed or, something that happens very often, not recognized by the court as legal. Finally, make certain your heirs know where your will is kept and keep it up-to-date.

Choosing an executor. An executor is the individual with the legal responsibility to carry out the specifics of your estate, to transfer assets and to pay any debts or liabilities. When you select an executor, find a person who’s trustworthy and capable of carrying out your wishes. It should be the type of person who knows when to ask for help. Name the executor in your will, so that the court doesn’t appoint someone.

Instead of automatically choosing a family member as executor, you can also hire a professional like a bank or a trust company. Speak with an attorney to get a plan that is customized to your needs and to get the rest of your questions answered. Call Rowley Law today at 847-490-5330, to scheudle an appointment. 

Reference: Next Avenue (April 7, 2017) “Probate, Wills, Executors: Your Estate Planning Questions Answered”

Got A Will? …Well, Why Not?

“The hit podcast "S-Town," which was downloaded more than 10 million times in its first four days, highlighted the importance of having a will.”

A will is great first step, but estate planning is an entire strategy to protect you and your spouse in retirement, and to leave a legacy for your heirs.

CNBC’s recent article, “Five ways to bulletproof your estate plan,” offers five easy steps to make life easier on your family.

Consider a pre-paid, pre-planned funeral. This can save your family thousands of dollars. In the stressful time of losing a loved one, it’s nearly impossible to properly grieve and properly coordinate all of the arrangements. Save money by shopping around and using a local funeral home, instead of a chain.

Create a family committee to manage your revocable trust. If you and your attorney create a revocable trust, it’ll cover you while you are still alive. When you establish the trust, appoint a "disability committee" of family members named in the trust to determine when you no longer have the required level of mental capacity. This committee can also help your family to avoid court and dealing with adult guardianship issues.

If you remarried, update your estate plan. An experienced estate planning and trust attorney will spot and alleviate your anxieties, while keeping you in the good graces of your spouse and in-laws.

Don't underestimate your life expectancy. If you go by the averages, you can anticipate living until your mid-80s. But 25% of 65-year-olds will live beyond 90 and 10% of 65-year-olds will live past age 95. That’s a lot of retirement years to fund. You should plan on being a little more conservative with your life expectancy estimates when estate planning, so that you don’t outlive your resources.

Match your lifestyle to your income in retirement. About 63% of workers say they’ll need less than $1 million for retirement, according a survey by the Employee Benefit Research Institute. Make sure you match up your income from retirement plans, Social Security, rental properties, and annuities with your living expenses. Do this calculation, because just 41% of workers and their spouses have done so

Reference: CNBC (April 7, 2017) “Five ways to bulletproof your estate plan”

 

Plan Your Charitable Giving in Your Estate Plan

“The reality is that taxes have always been a secondary component of the charitable giving process and now may be less critical than ever before. As tax planning has become less relevant, personal goals and the role of the adviser have gained in importance.”

Financial Planning’s article, “Charitable giving: It’s not just about taxes,” says that charitable giving is frequently considered a matter of tax planning. That includes pinpointing highly-appreciated assets to donate and perhaps creating a charitable remainder trust or a charitable lead trust. However, the issue of the estate tax has become less important for many,  since the federal estate tax exemption has increased ($5.49 million per individual in 2017). President Trump also spoke of repealing the estate tax, and only 18 states and DC still have an estate tax. Therefore, even state estate tax savings are less relevant for most donors.

For many years, planning a major gift would be based in no small part on maximizing the income and estate tax benefits of the donation.  However, donors may now want to consider the effect of a major gift on their future financial security.

This change in focus should mean more comprehensive financial forecasting to help you in structuring large donations, and more complex gift structures may be required.

A donor may want to commit certain dollars now and in the future, but might want to make other commitments that are contingent on his or her future financial condition. He or she may pay some of a charitable pledge now, some at a later date, and the remainder based upon a future event. This gives the donor added financial security.

In some instances, a donor planning a large charitable gift, will want to consider his or her long-term care needs into the plan, and long-term care insurance can be purchased as part of the charitable planning to give the donor a safety net.

Some retiring baby boomers believe that charity is about making a difference—and often they want to be actively involved in that process. Talk with your attorney about the many ways you can tailor a donation to meet a wide range of personal objectives. This can also entail writing an agreement with the charity that specifies the way in which the donation will be used. You can also add milestones when more donations will be made, like when the charity attains specific program goals.

As you age, you might want to involve a care manager with your planning to sketch out future medical costs and to be certain the financial model supports the gift. Speak with an experienced attorney to make sure your charitable gift is set up the way you want, call Rowley Law today for an appointment, 847-490-5330. 

Reference: Financial Planning (April 11, 2017) “Charitable giving: It’s not just about taxes”

IRAs are a “Must-Have” For Retirement Planning

“There are several advantages that IRAs have over other ways to save.”

Everyone wants to take advantage of tax breaks when they're available. One smart way to do this is with an IRA: it gives those saving for retirement some potentially significant tax savings.

You can go with a traditional IRA for immediate tax deductibility or a Roth IRA that provides for tax-free, long-term growth. Either choice of an IRA in your retirement planning can leave you with more funds for the future. Motley Fool’s recent article, “Why the Smartest Retirement Savers Have an IRA,” describes several advantages that IRAs have over other tax-favored accounts that make them a “must-have” for retirement planning.

1. IRAs have flexibility. Many folks say the biggest negative about their 401(k) plan at work is that they are poor investment options. The plans don't offer a variety of investment choices and have high fees. This takes away the savings power of a retirement plan and costs tens of thousands of dollars in lost expenses over the course of a career. However, an IRA allows you to invest in just about anything you want including individual stocks and bonds, mutual funds, or gold bullion. You can also select the lowest-cost options to implement your investing strategy, saving a lot of money that would otherwise have gone to financial providers.
2. No employer OK needed. Whatever you make or what other options you have for retirement savings, you can always start an IRA. You only have to earn enough income to cover whatever you contribute, up to the maximum contribution allowed. Note that those over age 70½ are not eligible to contribute to a traditional IRA, and Roth IRA contributions are subject to income limits. There are also other income limits that impact your ability to deduct contributions to traditional IRAs. But if you don't have access to a retirement plan at work, an IRA can be a great option for a tax-favored way to retire.
3. IRAs can live on after you pass away. An IRA isn’t only for retirement—it can also help with estate planning. Your heirs will have the option of stretching out the required minimum distributions (RMDs) throughout their lifetimes. This can extend the tax benefits of the IRA for another generation and avoid the tax liability for decades longer than would otherwise be possible.
4. Manage your taxes with an IRA. A major advantage of an IRA comes after you retire, when you can manage the tax implications of IRA withdrawals to lessen your tax bill over time. Therefore, if you have a combination of traditional and Roth IRAs, you have the ability to tailor your withdrawals to give you the desired amount of taxable income. Traditional IRA withdrawals are included in your taxable income. However, most Roth IRA withdrawals aren’t. This can give you the flexibility to match up your finances with your tax bill.

Savvy investors use IRAs to plan their retirement better as well as to plan a better retirement.

Reference: Motley Fool (March 5, 2017) “Why the Smartest Retirement Savers Have an IRA”